Personalized: Customer Strategy in the Age of AI (Part 1)

Welcome to Readers, the podcast for the lifelong learner. Join us on our weekly dose of wisdom where we talk about the real life lessons and applications of books. Enjoy. Welcome back to Readers, everyone. Today we're back with another episode, and this time we're interviewing David Edelman, bestselling author of Personalized: Customer Strategy in the Age of AI. David, welcome to the podcast. I'm looking forward to this.

Thank you. Pleasure to be here.

Absolutely. And you know, you've kind of done it all, right? I mean, a C-suite advisor, public speaker, former partner at both BCG and McKinsey, executive positions at companies everywhere from, you know, education boards, venture capital firms, and health companies, right? And now you run your own advisement firm. And so just before we even really get into the heat of the episode, we'd love to hear a little bit about your journey, what brought you to where you are, and also a little bit more about this book that we're gonna be discussing today.

Yeah, sure. So, so the journey to this book actually started pretty early in my career when I was in business school. I wasn't quite sure what I would be interested in, but I came into business with a very strong core that had an affinity to the arts. I was— I had music-directed shows, which meant I conducted the band, did vocal arrangements. I played saxophone, which I still do. And I always felt that there had to be something that had both the left brain, which is the rational side, and the right brain, which is the creative side. And as I took more courses in business school, it came very clear to me that marketing really brought that together very nicely for me. Also, marketing's about growth. It's not about, you know, just cost cutting and efficiency, which is important, but it's really about growth. And I liked that. So I decided to focus on marketing and got an opportunity with BCG to join. And they let me focus on marketing there. And very early on, so this is 1989, so I am going to age myself. I was a young consultant there and had worked on 3 projects in a row where clients were asking, what do we do with customer information that we're starting to collect? Now, mind you, this is before the internet. Okay? So, this is way before all the stuff we know now. Yeah. And they were starting to ask. And so, we worked with them on loyalty programs, on rethinking the way they handled calls in the call center, how to think about segmentation for direct mail and even telemarketing. And I wrote an article called Segment of One Marketing that came out of that. Realizing that this was only going to grow in importance. And that article became the rocket fuel for my career. It caught on, it got covered by a number of major publications. I was invited to speak, I brought in clients. Then of course the internet happened and I helped BCG build an e-commerce practice. I left to help start Digitas, an interactive agency. Then I went on, like you mentioned, to McKinsey, helped them build the digital marketing practice, and then was CMO of Aetna, and then a free agent starting my own thing. And also, I was teaching at Harvard Business School. But all through that, the thread was around how brands can deliver more value using customer information appropriately. And that's an important word. And so now with the advent of AI, the possibilities are enormous for what you can do. But there's a high road and a low road. There's a low road that says, let's use all these capabilities to find out when people are at their most vulnerable and to try to lure them into buying and then give them a little shot of dopamine so they don't regret it. I mean, God, how many video games are based on that, right? How much online gambling is based on that? But there is a high road as well, a high road that says, We're gonna actually provide more value. We're gonna change your experience so that you appreciate how we're using customer information to help you. And that's why in using services like Spotify, Uber, even Amazon, you're drawn to them because they know you and that helps you. And now the capabilities are even more available, not just to digital natives like those firms, but to regular, more traditional companies who can adopt a lot of the practices that drive positive personalization. So we wanted to write a book on this. I co-wrote it with the current head of BCG's marketing practice. I'm doing some advisory work with them. And we had a ton of examples, and we wanted to show that while everyone's talking about personalization, there's really a high road strategy that's not only important, but actually drives growth. And we could prove that through correlation analysis by companies who were doing it better than others. And also to make the point that it's not just about marketing. It really takes a village. It takes all the executives working together to make it possible. And the book's caught on. We hit number 4 on the business bestseller charts. I've been invited to do a lot of public speaking. I do client work based on that. And so it's been resonating and I'm really glad to see that.

Yeah, absolutely. I mean, your book is on the BCG website, right? As like the book for personalization. I mean, it's a $2 trillion opportunity and obviously that's a market share everyone wants to try to capture, right? So I think I really like how you almost introduce personalization as not this, sort of just product that a company has to have. And, you know, like you mentioned, taking the high road and the low road, right? And your approach is almost tying a company's success to the success of the customer, right? In which way you would kind of both get benefit from that process. And, you know, I know we're on this time crunch, so I want to really get into it and jump right into Chapter 1 with this. I'm excited to get into it. You ready?

Yeah, absolutely.

Fantastic. So you start this chapter off kind of by highlighting the difference between customization and personalization. You know, and in your words, you say, "Personalization is creating experiences at scale that get fine-tuned with each successive interaction, empowering customers to get what they want better, faster, cheaper, or more easily." You know, so I know this is a loaded sentence here, right? Can you break that down a little bit and share what it means for the companies that actually want to incorporate that into their, you know, their workflows, their pipelines, and really just their customer interactions?

Sure. So first off, the difference with customization. Customization is something companies have done for a long time where you could break something down into modular pieces and order something that's put together like a couch, for example. You know, you're buying furniture, often it's very modularized. That's customization. That's been around. What we're talking about now is really being proactive in using information through the flow of an experience. So let me give you an example of this that kind of unpacks a lot of that. So, Sysco, not the tech firm, but there's S-Y-S-C-O, the food delivery company, delivers food and all kinds of supplies to eating establishments around the world. When you open the Sysco app If you are a buyer for a restaurant, in 300 milliseconds, it knows who you are, your restaurant, the nature of your restaurant, your price points, your menu, where exactly you're located, and what are the implications of that geography. It knows whether you buy in bulk or in spot. It also knows what's in the nearest warehouse, and if they have to move certain things because it's food, from the warehouse that they're willing to discount. And they know whether you use those things in your recipes. And if not, they can suggest new recipes to you that help you take advantage of discounts on what they offer. That puts so much together. That— so talking to someone who uses that app, that is helping them every day. They don't want to spend a lot of time buying food from Sysco. They want Sysco to know the kind of stuff that they need, provide them suggestions for new things and discounts to take advantage of. Make it quick, make it dependable. And Cisco has grown 50% faster than its competition since they launched this. So, that's what we mean by personalization. You're changing the whole value experience for a buyer when you make that possible.

Yeah, I feel like that makes it so much easier for— I feel like there's a lot of obviously opportunities to take the low road there, right? Where companies are able to kind of use your information and things like that, but at the same time, the best alternative is to be able to use it to actually further their own business while helping you do what you need to do, right? And this is kind of where you introduce the 5 promises, right? And I'll kind of run off these really fast and just do a quick bullet point, and then we'll dive a little bit deeper into each chapter, and I'll ask you a question on each. So, you know, you start with number 1, Empower Me, right? This is the one you say is the most important, and it's the first one. Putting the customer in the driver's seat, helping them reach their goal through your service, and ensuring you're kind of on that same page about helping them get there. Number 2 is know me, gathering intel on your customer types, using your knowledge of their preferences to kind of create the most pleasant experience for them. Third is reach me, having the ability to market, get your product out to the right consumer, and being able to also reach them in the right channel at the right moment is something you really highlight here. Fourth is Show Me, right? Being able to constantly present the consumer with relevant information tailored to their preferences. And then last is kind of the purpose of all of this, right? Delight Me. To constantly innovate and improve the processes through which the customer actually interacts with your product and coming up with new ideas that can actually impress each customer and pretty much just make them excited to keep doing whatever they're doing. You know, before we jump into Empower Me, which is the first one, I do want to ask, right? There's a lot of startups and companies out there that are just getting started today, and that's just going to grow, right? But among these 5, what do you really see as the starting point, especially for early-stage founders or smaller teams? If you kind of had to pick that one promise to start with, which one would really get the highest priority?

It has to be Empower Me because it is about what you are selling. So are you using information to create value that the customer could not get otherwise? Are you addressing compromises that a customer faces? Are you enabling them to do new things that they never even thought they could do before? That's the key. It all comes down to the value proposition. Then all those other promises are enablers to make that possible. You have to work through all of those to deliver Empower Me, but it starts with that perspective on how do you help the customer get more value.

Gotcha. I love it. And, you know, with that, we'll jump right into Empower Me, which is, as you mentioned, the first and the most important of all the promises. Now, you give the example of Starbucks in this chapter, right? You talk about growing loyalty, rewarding the customers, etc., right? And this sounds incredible, but when it comes to actually making decisions, having full control, and being behind the steering wheel, How do you feel like you're able to design that choice architecture so that users actually feel that autonomy rather than, you know, decision fatigue, right? Like every, every consumer wants to feel like they have the power, like they're holding the steering wheel. But that being said, no one wants to take 30 minutes to order a coffee, right? So how do you feel like you're able to incorporate that in companies where they're able to empower the consumer and give them as much power without, you know, while also making things easy for them?

Yes. And that's where bringing your knowledge of the customer allows you to frame that choice architecture in a prioritized manner so that the things that are most likely for someone, and in the case of Starbucks, given what they've ordered in the past, but tied to things like the time of day, the location, is somebody near work on their way to work, or are they Maybe a tourist in a town they haven't been in before. Might it be near mealtime where food would be? So what have you ordered in the past that aligns with the exact context that you're in? And so, a big part of the value is limiting the choice architecture. I mean, let's face it. That's what Spotify does with music based on the things you like. Now, the challenge is making that box too small, and you lose the joy of fresh discovery. And the challenge for brands is how to introduce slightly new areas of discovery. In the case of Cisco, which I talked about earlier, they introduced new discovery by giving you ideas for recipes that take advantage of things they want to move. So people do want to expand, And so, you've got to think very carefully about how to inject that. But the whole point is to add value by making that choice architecture much more relevant.

Gotcha. And I feel like from your point, that really leads to your second rule or your second promise, right? Know me. I feel like you're only able to empower the customer, delight them, all these other things if you truly know the consumer in the first place, right? And this is exactly what you say in this chapter is It's extremely— this part is extremely important because it's foundational to enabling the other promises of personalization. If a consumer trusts that they'll get value out of it, they're more likely to share their data, to give permission for their benefit, things like that. And here you claim that consumer data is the essence of know me, right? And you also share the 3 principles for actually managing that customer data. To, you know, kind of wrap that chapter up, you also bring up the example of financial services like Fidelity, JP Morgan, Voya, and and more, right? Now, of course, these companies possess a lot of data about their customers, everything from planning ahead to retirement funds, investment accounts, and more, right? But, you know, that brings me to kind of two questions, right? A, what are the two company— or when it comes to companies that maybe don't have as much zero-party data, what is the secret when it comes to being able to create a product or service that people would actually want to give their information for, right? And second is, how do you establish that trust in the first place? Because, you know, no one really wants to just give their data out to someone they don't know. And another thing you kind of introduced in this early chapter 1 actually was speed is key, right? Being able to move fast. But that being said, relationships take time. So, and you know, between the company and the consumer, there is a relationship. So how do you feel like you're able to establish this trust while moving further and being able to know the consumer better and better as you keep going?

Yes, a lot of it has to do with the core thing you are actually selling and how much the consumer feels information can be more valuable along the way. So, any financial services firm really gets value if they understand your goals. What are you saving for? What are you borrowing for? What are you trying to strive for? And the more they understand those goals and where you are in relation to those goals, the more help they can provide. Again, coming back to your earlier point, limiting the choice model to things that are going to be relevant for you. So, one of the key things is just asking people questions and then in the follow-up saying, "So, if that's what you're interested in, would you consider these things? Would you consider these things?" A good example of that actually comes from a bit different. I was Chief Marketing Officer of Aetna, health insurance company, and we sold Medicare to individuals over 65. And people are very confused about health insurance. They don't understand it. They don't know the differences. So, we started the whole thing by just asking people some questions about trade-offs. You know, what's more important for you, choice of a doctor or lowest cost? Is it important for you to have out-of-state or even out-of-country coverage? And so, we had— and as each one, we came back and actually gave people a little bit of information as to why that's an important question. And then, through even as few as 3 questions, we could take the choices and dramatically narrow those down. And then, along the way, we've learned something about the customer that we can use to help them take advantage of capabilities and what they bought. So, a lot of it has to do with the dialogue. It's like Marriott asking frequent business travelers, "Where do you want to go on your next vacation?" They do that and they store it. And that's valuable on both sides. So, a lot of it just comes from tone, transparency, and very quickly turning that into value.

So, what I'm kind of hearing is the key to being able to know your consumer is being able to speak to them often, to be able to have these interactions where they're sharing feedback, where you're asking them questions and you're getting their input for what they truly value, right? And I think this is a perfect segue into Reach Me, right? Because that's, that's what that whole chapter is about. And this third promise, Reach Me, ensures your customers of relevance, of timeliness, right? And for this to work, a company actually has to start by having the permission and the ability to actually contact these customers, right? And You say here that success is measured by contactability and driving engagement. Now, I want to kind of tie this back to my own life, right? Because obviously you've worked in these big companies and corporations like MBB and things like that, right? But you've also worked in venture capital and seen what these startups have and things like that, right? And a lot of people today are trying to do the same thing, right? Start your own thing, me included. One problem shared across a lot of developers is is being able to reach the right customers, ensuring they keep coming back, and utilizing all those possible channels, right? So kind of asking from your experience working with startups and venture capital, right, what advice would you give to someone in that similar position, especially if, you know, they're bootstrapping, or maybe they don't have all the same resources as a company like McKinsey or BCG? How do you ensure that you reach your customers and reach through the proper channels?

Well, a lot of it has to do with understanding who your MCP, your ICP, your ideal customer profile is. And so, you really have to think that through. To whom are you actually adding what kind of value? When I taught at the business school, it was very clear people were just thinking about products that could do things. Versus necessarily who are they really helping and how. And what is it that somebody who buys your product can do that's going to add value to their lives or to their business? So you've got to start with a real understanding of the customer. You have to be in their shoes. You have to go out and actually talk to customers and see what they're doing now and understand what the changes are if they adopted your product. Understand where do they get information? Are they going on to discussion forums? Is it something they look up in videos on YouTube? Is it just a question of search? Nowadays, it's going to be AI search. They're going to go into ChatGPT, Perplexity, Google Gemini, and they're going to put in all the information about what they're looking for to find it. So you really have to think through what are the questions you are answering for whom, and then use that to guide where you focus. Too many times, it's just about a product getting pushed out. You have to start— and this is a common refrain, of course, in what I talk about— you have to start with the customer first.

Yeah, no, I love it. I mean, I think a lot of this kind of gets tied back to being able to show the consumer or the customer that, you know, this is a product that can add a lot of value to your life. Right? This is something that can change or honestly create a need sometimes, right? And I think this is— this really ties back to that fourth chapter, Show Me, right? And this is an aspect that encompasses almost all the promises, in my opinion, right? Being able to effectively create, manage, and deliver that personalized content to strengthen customer engagement. Now, in this chapter, right, you discuss a lot of tactics to— and this is where you also bring up AI, right? And you talk a lot about AI in this chapter. Chapter, you discuss the tactics to utilize generative AI and beyond to kind of strengthen your content strategy and push the right content to the right people. Now, of course, at the end of the day, right, as competent as AI is for bringing your ideas to life, the strongest points of content creation and distribution have to come from the mind of someone who, you know, who truly understands the heart of the company and the consumer, right? So I want to ask you from a more broad standpoint of AI and what you've seen in the field, where do you feel like generative AI really delivers, right? From creating variants for different languages or audience segments or other moments. And where have you seen it trip up or where are the moments where you feel like this is where we need a person behind the wheel? When do we know that it's time for the human intuition or the human touch when it comes to the aspect of show me?

Yeah, sure. So one of the big things that generative AI can do is take your insights and your ideas and be something that you can work with back and forth to refine those ideas and turn them into visualizations, videos, advertising, graphics, things like that. And you can see that, you can experiment. Maybe you'll come up with something that's ready, but you have to have the insight. You've got to say, what is it that we're trying to grab onto in the emotional state of the customer that's going to resonate. Generative AI cannot do that, at least not yet. You have to have that insight from being out there talking to customers, doing your research, and then you can use generative AI to come up with different ideas, test them, figure out what works. But it's an extension that takes your strategic thinking. And so I've seen clients of mine try to use generative AI to come up with the ideas in the first place. And it's often flat. And you're starting to hear a term called work slop. That was just in a recent Harvard Business Review article where people are using GenAI to create things that others are not they're not, it's just not right. It's just not on point. And so they gotta work to make it on point when in fact the issue isn't changing what you get from GenAI, it's thinking about in the first place what you're asking for. So I think we have to be careful. We used generative AI, we created personalized videos for every new member of Aetna to help explain their health insurance. And we had to try a whole lot of different ways of doing it, but we started to quickly realize there was an insight that we had that people start first from their families and then move out. Who in your family is covered? Okay, what do they have? A primary care physician? Where are the urgent care centers in your area that you can get help? Then get into the economics, then get into some of the harder, more complicated. And you gotta figure out how people are thinking about this and first connect with their emotions. Gen AI isn't gonna get you there. So I think that the main exhortation here, just like before, is get to know your customer.

So what I'm kind of hearing, right, is this AI is really just an extension of your creativity, right? For implementation, for— being able to actually reach back out to that customer and make it more efficient. But when it comes to idea generation or creativity or, you know, things like that, or actually connecting with the customer, that's not something it can ever do. Or if it does, as you said, it looks like work slop. I like this term. I'm going to remember this now. Now, of all these 5 promises, right, we've talked about ways AI can kind of implement or be able to make things more efficient. But this fifth promise is the one I feel like takes the most human intuition of all, right? Delight me. Now, as many things as AI can do, as many essays it can write for me in college, right? As many things like that it can do, it definitely can't delight me, right? It can't connect with my emotional feelings and things like that. Now, you say that being able to delight the customer is only able to happen if a company is able to innovate, to test or scale up great experiences, right? So that the customer is never bored and excited to keep consuming. But to further push this point, you also bring up the 70-20-10 rule, which implies that 70% of effort in AI transformations actually comes from people.

Yes.

20% from data and actually only 10% from technology. Now I really want to harp on this point, and this is the last question I'll ask here 'cause I know our time is kind of running out. But I think this is really surprising and almost shocking to me because considering most people wouldn't think of humans as the heart of AI, you also state the point that most companies, as can be expected, get this wrong, right? And flip the equation. So just last question, can you feel— can you justify the numbers in that 70-20-10 rule? Why do humans play such a big role and why do so many companies get it wrong?

Humans play such a big role for a lot of the reasons that we talked about. Humans have to bring the understanding of the customer into it. Humans have to bring the insights and the creativity. Often, a lot of the ways you delight people are cross-functional. They require marketing, customer service, operations to work together. And in companies where everybody is in their own separate functional group, it's really hard to bring together the village that's needed to actually think through a new experience. And then you can use AI to enable it. AI is most powerful when it's cross-functional, when it's using data across different parts of your business and bringing it together and then taking actions that can touch various parts to help a customer get something done. And so the ways of working are critical in terms of bringing— thinking about the customer first in the strategy, really bringing that customer understanding to bear, then bringing cross-functional teams together, and then testing and learning, testing and learning, constantly experimenting. All of that— the data and technology isn't going to do that for you. Those are tools. But you as a company, and when we looked at who was more successful versus not, that really stood out as a dramatic difference.

Yeah. I love it. I think through the course of your book, there's so much quantitative knowledge and evidence and examples and statistics, right? There's a lot of consulting lingo. I can kind of see that in there, right? But I love how you're able to break that down into such qualitative conversations. And just be able to talk about it like it's just another interaction that you have on a daily basis, right? And you know, with that, we'll wrap up part 1 of Personalized Customer Strategy in the Age of AI. I think today we learned a lot, right? We learned about how a company's able to take steps to prioritize personalization for their customers, for their clients. We talked about utilizing AI and other technologies to ensure efficiency while making sure that the human emotion and heart is behind the wheel, right? And Lastly, we also discussed the 5 promises which keep companies competitive and satisfying their customers. So next episode, we'll talk a little bit more about how to make that happen from a people's perspective, the leadership of tomorrow, measuring our impact, and also discuss a little bit about the future of personalization. So thank you so much for joining us today, David. It was an absolute pleasure.

My, my, my pleasure.

It was fun. I had a great time and I'm excited to see what we can kind of talk about when it comes to the C-suite and how leadership is going to change as personalization grows more and more. So until then, stay tuned for part 2. And to all our listeners out there, keep on learning, keep on changing, and keep on growing. We'll see you next time.